How to gain an advantage when buying a home this festive season

Bright colours, gorgeous attire, an amazing spread of delicacies, beautiful dances and more—festivals in India reflect our rich culture and heritage. The 2019 festive season in India is around the corner with a line-up of major festivals like Dussehra, Diwali, Durga Puja, etc., not too far away. The festive season is when many of us aspire to make major purchases because it is considered an auspicious period, and also a time when discounts are on offer.

For many, these reasons make the festive season the best time to buy a home too. Interestingly, the 2019 festive season is one with a combination of unique positives for home buyers. Real-estate prices are at an all-time low across most Indian cities. Developers who are struggling with liquidity issues because of the NBFC crisis are offering deeper discounts than ever before. Plus, interest rates on new loans haven't been this low in years. What’s more, interest rates are expected to further fall from October 1, once the Reserve Bank of India's new rule for banks to link all new floating rate retail loans to an external benchmark kicks in.

Will prices fall further?

The big question that most prospective home buyers are asking is whether property prices will correct further and if they should wait even further. Experts seem to suggest any wait may be futile. Based on data for the past year, prices in most cities are beginning to increase marginally. In addition, funding has become an even greater challenge for developers with the NBFC crisis, even while input costs are rising. In addition, the regulator has banned subvention schemes—further choking working capital. Profit margins are contracting, and according to a report by CARE Ratings, EBITDA (earnings before interest, tax, depreciation and amortization) margins for 25 listed real estate developers contracted by 230 basis points in the past year. Hence, there seems to be minimal scope for further price corrections.

Make the most of your real estate spend

There are other factors that can ensure your investment in a home is a blessing. One is to invest in micro markets where price appreciation is higher than in other parts of a city. Most often, these pockets are those where infrastructure at scale is coming up. For instance, a metro system that's being constructed, or an upcoming airport, an emerging business hub, etc. If you can identify the right micro-market within the city you wish to buy a home in, you can ensure reasonable price appreciation to protect your investment as opposed to other areas in the city where prices may not rise as quickly.

The second factor is whether to buy a ready to move in home or one under construction. Under-construction properties will be cheaper and will offer a greater chance of price appreciation. However, it may be wiser in the current environment to look for ready to move in homes, unless you have the risk appetite, and especially if this home is where you intend to live in. Of course, it also depends on the developer—reputed developers would be safer bets. But ultimately, in a sector severely affected by the liquidity crisis, it may be better to be safe than sorry.

Choosing the right home loan

Many feel that deciding the right property is 99 percent of the job done, but they couldn't be more wrong. Most of us depend on a home loan to finance the purchase of a home and considering tenures of home loans often last for nearly 30 years, it’s important to select the right partner. Not all home loan providers are the same, despite what some may say. A superior home loan provider can ensure you pay as less as possible over the tenure of the loan, while also getting the best of convenience, safety and security.

The most important criteria therefore is a home loan partner who has your best interest at heart and offers innovative offerings so you can save your hard-earned money. For instance, a home loan linked with a savings bank account where any credit available in the linked savings bank account will be counted for credit in the linked home loan account. This gives you the benefit of interest amount reduction in your home loan to the extent of daily outstanding credit balance in the linked savings bank account.

Another factor is processing charges, which can vary from bank to bank. If developers are offering festive discounts on homes, why not look for a bank that has festive offers on processing charges too? For instance, Bank of Baroda is currently offering a waiver of processing charges for home loan borrowers, subject to recovery of out-of-pocket expenses of Rs 8500 + GST. What's more--this offer is valid till March 31, 2020. Benefiting from such an offer means you save a significant upfront cost that could go towards purchasing some consumer appliances for your new home.

Fine print, flexibility & extras

Some banks may seem to offer you a great deal, but may suck you into expensive insurance schemes that may cost you a lot more than what you saved on other charges. Read up insurance schemes on offer carefully and make sure you go in for a home loan partner who gives you great service, a very competitive interest rate, low processing charges and also helps you with a reasonable insurance scheme that doesn't cost the sky.

Flexibility also matters. Which is the bank that will give you a higher loan amount and a longer tenure, ensuring you can buy a better home? And finally, look for extras on offer. A bank that sees a home loan as the start of a lifelong relationship should offer you discounts on other loans like car loans, or a free credit card, personal accident insurance, etc. These things matter—even a 0.25 percent discount on a car loan will see you saving thousands of rupees and a free credit card is helpful as a financial tool, while free personal accident insurance is always welcome, because anything that protects you is a good thing.

One bank that offers many of these features and advantages on home loans is Bank of Baroda, respected for years as one of India's finest banks. This festive season, as you seek to gain an advantage in buying a new home, make sure you check out innovative and smart home loan offerings from Bank of Baroda which could make your home loan as much as a blessing as your new home.

*This is a sponsored article by Bank of Baroda